The Filters of ERISA’s ‘Body Language’

A recent blog entry discusses the role of the Form 5500 in tripping the triggers for an investigation by the Employee Benefits Security Administration (EBSA).

Jerry Kalish in the Retirement Plan Blog notes that the DOL, the IRS and the Pension Benefit Guaranty Corporation (PBGC) have released advance copies of the 2020 Form 5500 Series. And when they are filed, he says, “they will join those of prior years, morphing into the body language of ERISA compliance. “

Kalish notes that the Form 5500 is one of the main triggers of investigations by the EBSA, and calls 2010 the “milestone year” for the form, since that was when EFAST2—electronic filing system through which the Form 5500 series must be filed—went online.

Kalish argues that this is especially important because EFAST2 is essentially a database, and that “like any database, it can be accessed by setting up filters.” He identifies the following as “low-hanging fruit” that could be caught in those filters and result in EBSA attention: 

• insufficient or nonexistent fidelity bonds;
• loans in default; and 
• failure to: 
  • provide benefits due to be provided; 
  • pass nondiscrimination tests and therefore having to return excess contributions;
  • include a plan audit form from an independent qualified public accountant, if required;
  • deposit employee contributions on time; and 
  • file the Form 5500 by the due date. 

The filters can also reveal a history of loans in default and late deposit of employee contributions, Kalish adds.  

An initial notice from EBSA that a plan sponsor is a target of an investigation, Kalish says, “will include a standard, extensive document request and perhaps a non-standard list generated by specific answers on Form 5500 or enforcement initiatives.” And he warns that the target of an EBSA investigation may not know what it concerns until the process has begun.

“Sometimes what isn’t available is more significant than what is,” Kalish wrote. He suggests that reviewing a plan for compliance with ERISA may be prudent, and that using a fiduciary checklist may be a good place to start.